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TMI Blog1955 (10) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... p was employed by the company because he was greatly experienced, and well versed in the kohlu hiring business having looked after the business of the firm and its predecessors for the last 30 to 40 years. The company entered into an agreement with Pt. Mela Ram by which the remuneration of the Pandit was to consist of 10 per cent, of the yearly profits of the company after allowing the usual working expenses, interest on loans and advances, repairs and outgoings, depreciation, etc., but without any deduction for taxes, appropriation to reserves and payment of managing agent's commission, subject to a minimum of ₹ 12,000. Mela Ram was also a shareholder in the company, but he held shares of the value of ₹ 10,000 only, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed at an extraordinary general meeting of the company held on that day. At that meeting were present the following: 1.Pt. Mela Ram. 2.Shmt. Bhagwati Devi. 3.Shmt. Angira Devi. 4.Sh. Shiv Raj Gupta. 5.Sh. R. C. Sharma. 6.Sh. Sita Ram. The amount to be paid by way of remuneration to Pt. Mela Ram is contained in clause 2 of this agreement which runs as follows : 2. That this remuneration shall be a sum equal to 10% of the yearly profits of the company after allowing the usual working expenses interest on loans and advances; repairs and outgoings, depreciations, etc., but without any deduction in respect of income-tax, super-tax or any other tax or duty on income or reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of the assessee company. I allow only 50 per cent, of the total commission of ₹ 81,961 credited to the account of Mr. Mela Ram, and ended up that portion of his order in the following words; It is somewhat strange that all along he has allowed to accumulate his income with the predecessor firm and now with the company. The withdrawals in the past also do not clearly justify that Mr. Mela Ram had free and full control over all his income, as he never withdrew in excess of his remuneration. An appeal was taken to the Appellate Assistant Commissioner who upheld the order of the Income-tax Officer and after referring to some decided cases he said: It may be pointed out that Shri Mela Ram was not a technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olly or exclusively for the purposes of the business of the company is in my opinion a question of fact and it is for the Income-tax Officer or the Appellate Tribunal as the case may be to determine whether the payment was made wholly and exclusively for the purposes of the business of the assessee. In Jethabhai Hirji Co. v. Commissioner of Income-tax, Bombay City [1949] 17 ITR 533, it was held that in every case it is for the employer to determine in what manner he would remunerate his employee, but it is for the Income-tax Officer to decide whether any remuneration paid by the employer to his employee is wholly and exclusively expended for the purposes of his business and that it is erroneous to contend that as soon as an asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome. This case was followed by a Division Bench of this Court in Hotz Trust, Simla v. Commissioner of Income-tax, East Punjab, Simla [1952] 21 ITR 149, where it was contended for the assessee that it was for the employer to determine what remuneration should be paid to his employees for the services rendered by them, a contention which was negatived by the learned Judges. Quite recently in Lakshmi Ammal v. Commissioner of Income-tax [1955] 27 ITR 584, where the Appellate Tribunal had found that the remuneration paid to an employee was not a sum expended wholly and exclusively for the purposes of the business of the assessee within the meaning of section 10(2)(xv) of the Income-tax Act and disallowed a portion of it and also refus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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